Over and above the sector specific risks, there can be variables which may impact the direction of the entire economy. “These variables will come into play in case the country’s electorate votes a fractured mandate and we have a loose coalition bordering on unstability. An unstable government may not take some of the difficult decisions which the economy while on a downslide may need desperately. These kind of general risks have to be factored in by the entire business class while the sector specific risks vary”, adds the paper.\
For instance, the paper further said, sectors such as information technology, pharmaceuticals, agro-products, automobile, hospitality etc would not face much of the sector specific political risks, notwithstanding the general variables like political unstability.
“With aspirational India demanding much more from the political establishment and emergence of the Aam Admi Party (AAP), the outcome of the coming elections is the most uncertain. The wind may blow in different directions. With populism being the buzz word and zeal for unearthing scams, businesses today are well-advised to factor in political and policy risks and map their business models accordingly”, said DS Rawat, Assocham Secretary General.
The Assocham paper said as the top global rating agencies are keeping a close watch on the unfolding political situation in India, the poll outcome would surely influence the big macro picture as well. The present policies like keeping a good leash on imports through higher duty on gold imports and their impact on the critical current account deficit (CAD) would be watched with a lot of interest.
The new government, it said, will have the constraints of less resource in the face of pressure on taxation in a slow moving economy but more clamour for subsidy-driven populist programmes.
“Even if we have a stable government, the new government tends to be goody- goody typically in the first year of its office. We cannot expect a slew of difficult and politically unpalatable decisions even from a stable government in the first year. All this will have a bearing on the country’s overall macro picture,” added Mr. Rawat.